Expedia Group delivered a strong third quarter in 2025, beating both top and bottom-line expectations with gross bookings growing 12% to $30.7 billion and revenue increasing 9% to $4.4 billion. The company achieved significant margin expansion, with Adjusted EBITDA rising to $1.4 billion (a 33% margin, up over 2 points) and Adjusted EPS growing 23% to $7.57, driven by share repurchases and operational leverage. Performance was broad-based, with B2B bookings surging 26% (marking the 17th consecutive quarter of double-digit growth) and advertising revenue up 16%, while the B2C segment saw its fastest U.S. growth in over three years. Citing solid momentum in October and improved demand, management raised full-year guidance, projecting approximately 7% gross bookings growth and further EBITDA margin expansion of roughly 2 points, despite a dynamic macro environment and lapping tough prior-year comparables in Q4.
| Metric | Value | Change |
|---|---|---|
| Gross Bookings | $30.7 billion | +12% |
| Revenue | $4.4 billion | +9% |
| Adjusted EBITDA | $1.4 billion | +2 points margin (33%) |
| Adjusted EPS | $7.57 | +23% |
| B2B Gross Bookings | $9.4 billion | +26% |
| Advertising Revenue | N/A | +16% |
| Room Nights | N/A | +11% |
| Free Cash Flow (TTM) | $3.0 billion | N/A |
B2B as a Primary Growth Engine: Expedia's B2B segment has become a critical growth driver, reporting its 17th consecutive quarter of double-digit growth with a 26% increase in bookings to $9.4 billion. Management emphasized the diversification of this business, noting that 65% is outside the U.S. and spans various partner types including offline agents, OTAs, and corporate partners. The 'Rapid API' product was highlighted as the fastest-growing component, indicating that technology integration with partners is a key strategic lever. This segment's resilience and scale provide a hedge against consumer market volatility and a pathway to higher-margin revenue.
AI-Driven Efficiency and Personalization: Management detailed specific use cases where AI is driving tangible financial results, moving beyond experimentation to execution. AI is being used to improve virtual agent resolution (handling over 50% of queries), enhance developer productivity, and drive 'record attach rates' on the Expedia platform through better recommendation models. The integration of AI into partner tools (ad portal) and customer service is creating a 'step function improvement' in efficiency. This signals that technology investments are yielding immediate operational leverage and margin expansion.
Brand Replatforming and Repositioning: Following a multi-year replatforming effort (2021-early 2024), management is now leveraging the unified platform to differentiate its three core brands. Vrbo is being positioned as a 'vacation rental pure play' with new trust features like 'Vrbo Care' and 'Loved by Guests' badges. Hotels.com is re-establishing itself as a 'hotel-only pure play' with the 'Save Your Way' loyalty feature. Expedia is focusing on 'attach rates' by integrating vacation rentals into the hotel search flow. This strategic clarity is driving improved performance, with Hotels.com growing at its fastest pace in over two years and V2B improving sequentially.
Sustainable Margin Expansion: Management articulated a clear, multi-year strategy for margin expansion that does not rely solely on revenue growth. CFO Scott Schenkel identified 'multiple legs of the stool,' including continued marketing leverage in B2C (optimizing scaled channels), cost of sales reductions (via AI and cloud management), and overhead discipline. The company delivered over 2 points of EBITDA margin expansion in Q3 and guided for another ~2 points in Q4 and full-year 2025, signaling a structural shift in profitability rather than a one-time event.
Answer Engine Optimization and Agentic Commerce: Expedia is aggressively positioning itself for the shift to AI-driven search through 'Answer Engine Optimization' and partnerships with OpenAI, Google, and Perplexity. While management acknowledged traffic from these sources is currently 'small,' they view these integrations as critical for staying at the 'leading edge of evolving technology.' The strategy focuses on ensuring Expedia's content is accurately reflected in AI answers and driving traffic back to their brands. This forward-looking stance aims to capture demand from new discovery channels before they become mainstream.
Q4 Growth Deceleration and Tough Comps: Management guided for Q4 gross bookings and revenue growth of 6% to 8%, a notable deceleration from Q3's 12% and 9% growth, respectively. This slowdown is attributed to lapping a 6 to 7-point acceleration from the prior year. While management cited 'continued momentum in October,' the guidance implies a significant slowdown as the quarter progresses. Investors should monitor if this is purely a mathematical comp issue or if demand is softening more than anticipated in the current macro climate.
Macro Sensitivity and Government Shutdown Risk: Despite the strong quarter, management repeatedly referenced a 'dynamic macro environment' and the need to remain 'agile.' Specifically, CFO Scott Schenkel discussed the potential impact of a U.S. government shutdown, noting that while they can absorb a significant portion of the air revenue impact (estimated at a $100M run rate), it remains a risk factor to Q4 performance. The mention of 'Canada volume into the U.S. remains pressured' also highlights specific geographic weaknesses amidst broader global strength.
B2B Margin Investment Cycle: While B2B is growing rapidly (26% bookings growth), B2B EBITDA margins remained flat at 29% year-over-year. Management explicitly stated they are 'prioritizing investments to support the continued growth of B2B.' This suggests that the high growth in this segment is currently coming at the cost of near-term margin accretion. Investors need to watch if these investments will eventually yield margin expansion or if the competitive landscape requires sustained elevated spend.
Air Revenue Volatility: The transcript highlighted specific risks to the Air segment, which is a 'major priority' but susceptible to external shocks like government shutdowns or system outages. Management noted that Air revenue was $101 million in Q3 and roughly $300 million year-to-date. While they expressed confidence in absorbing shocks, the reliance on external factors (government operations, weather) for this segment adds a layer of unpredictability to the revenue stream.
Overall: Management exhibited a high level of confidence and enthusiasm throughout the call, frequently using terms like 'solid momentum,' 'strong performance,' and 'clear proof points' to describe the company's trajectory. There was a distinct shift from discussing recovery to discussing sustainable growth and margin expansion, with executives emphasizing the successful execution of their strategic priorities and the tangible benefits of their replatforming efforts.
Confidence: HIGH - Management raised guidance for the full year and Q4, citing 'real confidence in our ability to execute.' They provided specific details on the 'legs of the stool' driving future margin expansion and spoke with certainty about the 'flywheel' effect of their B2B and advertising businesses. The tone was assured when discussing the integration of AI and the recovery of the Vrbo and Hotels.com brands.
6% to 8%
Approximately 2 points
Approximately 7%
Approximately 6% to 7%
Approximately 2 points
Expected to continue, albeit at a more moderated pace than 2025
Hedging & Uncertainty: Management used relatively limited hedging regarding their core performance, using strong definitive phrases like 'clear proof points' and 'real confidence.' However, hedging appeared when discussing the macro environment and forward-looking AI traffic. Phrases like 'dynamic macro environment,' 'monitoring economic indicators,' and 'it's early days' regarding AI search volume suggest caution about external factors they cannot control. When discussing the government shutdown, Schenkel used conditional language: 'if you think about Air... even a significant reduction... we should be able to absorb,' which provides a buffer against expectations. The use of 'approximately' and 'about' in guidance (e.g., 'up approximately 7%') is standard but allows for flexibility.
We're building solid momentum across the company with clear proof points that our strategy is working. - Ariane Gorin, CEO
We have real confidence in our ability to execute and create value for all of our stakeholders. - Ariane Gorin, CEO
We are raising Q4 and full year guidance. - Scott Schenkel, CFO
I think we've got multiple legs of the stool to drive cost out of this business to get leverage and drive margins up. - Scott Schenkel, CFO
It's early days. And so the volume of traffic is still relatively small... - Ariane Gorin, CEO
We're keeping a close eye on economic indicators and remaining focused and agile amidst a dynamic macro environment. - Ariane Gorin, CEO
Analyst Sentiment: Analysts were generally inquisitive and constructive, focusing heavily on the sustainability of the margin expansion and the mechanics behind the B2B growth. There was significant interest in the competitive landscape regarding AI and 'Agentic Commerce,' with analysts probing the quality of leads from partners like OpenAI.
Management Responses: Management responses were detailed and open, providing specific 'legs of the stool' for margin expansion (marketing leverage, cost of sales, overhead). They deflected competitive concerns on B2B by emphasizing their long-standing relationships and diversified partner base. They were transparent about the 'early days' of AI search traffic but optimistic about personalization capabilities.
B2B Growth Sustainability: Analysts asked about the 'building blocks' for future B2B growth and competition. Management emphasized signing new partners, expanding with existing ones, and diversifying into other lines of business like car rentals and insurance.
Margin Expansion Drivers: Analysts asked for the 'big picture' sources of margin expansion. Management detailed marketing leverage, cost of sales efficiency (AI/cloud), and overhead discipline.
AI and Agentic Commerce: Analysts inquired about the quality of leads from Gen AI search (ChatGPT, Perplexity) and the potential for an inflection in online travel purchasing. Management confirmed leads are good but volume is small; they are optimistic about personalization driving demand.
Replatforming Benefits: Analysts asked how the completed replatforming is helping compete. Management cited unified data platforms, common lodging paths, and the ability to quickly roll out features like 'Save Your Way' across brands.
Vrbo and Hotels.com Recovery: Analysts asked about the performance of these specific brands. Management noted Vrbo maintained/grew share and Hotels.com grew at its fastest pace in over 2 years due to brand repositioning.
Expedia Group has successfully navigated its multi-year turnaround, transitioning from a restructuring phase to a phase of sustainable growth and margin expansion. The Q3 results provided 'clear proof points' that the strategy is working, with broad-based strength across B2B, B2C, and Advertising. The B2B segment is a hidden gem, offering consistent double-digit growth and diversification, while the B2C segment is finally seeing the benefits of the replatforming effort through improved marketing efficiency and brand recovery. The company's aggressive integration of AI is driving real operational leverage (customer service, developer productivity) and product improvements (attach rates), supporting the thesis for continued margin expansion. While Q4 faces tough comps and macro risks, the raised guidance and strong cash generation ($3B TTM FCF) signal a company that is executing well and rewarding shareholders via buybacks. The risk/reward profile is positive as the company leverages its 'one-stop travel marketplace' position.
Management described the market as 'healthy' with an 'acceleration in the U.S.' and 'continued strength in the rest of the world.' Key indicators like 'longer lengths of stay' and 'longer booking windows' point to a resilient consumer.
FX provided a tailwind in Q3, contributing 1 point to gross bookings and 2.5 points to revenue growth. Guidance assumes a continued tailwind of 1 point for bookings and 1.5 points for revenue in Q4.
Management is closely monitoring a potential U.S. government shutdown, which could impact Air revenue. They estimate they can absorb a significant portion of this impact (up to a $100M run rate reduction) but acknowledge it adds uncertainty to Q4.
Inbound travel to the U.S. is nearly back to last year's levels, with Europe and APAC corridors recovering. However, 'Canada volume into the U.S. remains pressured,' though it did improve as the quarter progressed.